PURCHASE AGREEMENT
Execution
Copy
THIS
AGREEMENT is made as of the 9th
day
of October 2006, by and between Aces Wired, Inc. (the “Company”), a Nevada
corporation with its principal offices at 00000 Xxxx Xx., Xxxxxx, Xxxxx 00000,
and ________________________
(the
“Purchaser”).
IN
CONSIDERATION of the mutual covenants contained in this Agreement, the Company
and the Purchaser agree as follows:
SECTION
1. Authorization
of Sale of the Shares.
Subject
to the terms and conditions of this Agreement, the Company has authorized
the
issuance and sale of up to 1,946,400 shares (the “Shares”) of Series A
Convertible Preferred Stock, par value $0.001 per share (the “Preferred Stock”),
of the Company, which shall automatically convert into shares (the “Conversion
Shares”) of common stock, par value $.001 per share (the “Common Stock”) of the
Company, on the date that the Registration Statement (as defined herein)
is
declared effective by the Securities and Exchange Commission (the “Commission”).
The Company reserves the right to increase or decrease the number of shares
of
Preferred Stock sold in this private placement prior to the Closing Date.
The
Shares are classified as convertible preferred stock of the Company for the
purpose of providing a mechanism whereby the Company may be required to pay
to
the Purchaser liquidated damages in accordance with Section 7.6 in the event
that the Registration Statement (as defined herein) is not declared effective
by
the Required Effective Date (as defined herein), all as more particularly
described in the Designation of Rights and Preferences of Series A Convertible
Preferred Stock attached hereto as Exhibit
A.
SECTION
2. Agreement
to Sell and Purchase the Shares.
2.1
Sale
and Purchase at the Closing.
At the
Closing (as defined in Section 3), the Company will issue and sell to the
Purchaser, and the Purchaser will buy from the Company, upon the terms and
conditions hereinafter set forth, the number of Shares (at the purchase price)
shown below:
|
Number
to Be
Purchased
|
Price
Per
Share
In
Dollars
|
Aggregate
Price
|
|||||
|
$
|
5.00
|
$
|
|||||
The
Company proposes to enter into the same form of purchase agreement with certain
other investors (the “Other Purchasers”) and expects to complete sales of the
Shares to them. The Purchaser and the Other Purchasers are hereinafter sometimes
collectively referred to as the “Purchasers,” and this Agreement and the
agreements executed by the Other Purchasers are hereinafter sometimes
collectively referred to as the “Agreements.” The term “Placement Agent” shall
mean Xxxxxxxx Curhan Ford & Co. The Shares are being issued and sold in
connection with the reverse stock split and stock exchange (the “Restructuring”)
with Goodtime Action Amusement Partners, L.P. (“Goodtime”). For clarification
purposes, the “Company” shall mean the Company after giving effect to the
Restructuring.
2.2
Purchase
Option.
At
any
time following the Closing Date but prior to the effective date of the
Registration Statement (the “Option Period”), Purchaser shall have the option to
purchase (the “Option”), and the Company agrees to sell upon the written request
of Purchaser in accordance with the provisions hereof, up to 20% of the number
of Shares (the “Option Share Amount”) set forth in the table in Section 2.1 of
this Agreement at a purchase price of $5.00 per Share (the “Option Price”). This
Option shall be exercisable in whole or in part by Purchaser provided that
in no
event shall the Company be required to sell more than the Option Share Amount
to
Purchaser pursuant to this Section 2.2.
At
any
time during the Option Period, Purchaser may exercise this Option, in whole
or
in part, by sending a written request to the Company in accordance with Section
11 setting forth the number of Shares to be purchased. Upon receipt of such
notice and the Option Price, the Company shall deliver to Purchaser a
certificate representing such Shares.
If
the
Company shall effect a stock split or reverse stock split, or a combination,
consolidation, reclassification, exchange or substitution of the Shares during
the Option Period, then in each such event the Option Share Amount and the
Option Price shall be proportionately decreased or increased, as appropriate,
to
give effect to such event.
SECTION
3. Delivery
of the Shares at the Closing.
The
completion of the purchase and sale of the Shares (the “Closing”) shall occur at
the offices of Xxxxxxxx & Xxxxxx LLP, 000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxx 00000-0000, as soon as practicable and as agreed to by the parties
hereto,
on September 27, 2006, or on such later date or at such different location
as
the parties shall agree in writing, but not prior to the date that the
conditions for Closing set forth below have been satisfied or waived by the
appropriate party (the “Closing Date”).
At
the
Closing, the Company shall deliver to the Purchaser one or more stock
certificates registered in the name of the Purchaser, or, if so indicated
on the
Stock Certificate Questionnaire attached hereto as Appendix I, in such nominee
name(s) as designated by the Purchaser, representing the number of Shares
set
forth in Section 2 above and bearing an appropriate legend referring to the
fact
that the Shares were sold in reliance upon the exemption from registration
under
the Securities Act of 1933, as amended (the “Securities Act”) provided by
Section 4(2) thereof and Rule 506 thereunder. The name(s) in which the stock
certificates are to be registered are set forth in the Stock Certificate
Questionnaire attached hereto as Appendix I. The Company’s obligation to
complete the purchase and sale of the Shares and deliver such stock
certificate(s) to the Purchaser at the Closing shall be subject to the following
conditions, any one or more of which may be waived by the Company: (a) receipt
by the Company of same-day funds in the full amount of the purchase price
for
the Shares being purchased hereunder from the Escrow Agent (as defined herein);
(b) the purchase by the Purchasers and the sale by the Company to such
Purchasers of Shares for an aggregate purchase price of not less than $8,110,000
on the Closing Date on terms substantially the same as those reflected herein;
and (c) the accuracy in all material respects of the representations and
warranties made by the Purchasers (as if such representations and warranties
were made on the Closing Date) and the fulfillment of those undertakings
of the
Purchasers to be fulfilled prior to the Closing. The Purchaser’s obligation to
accept delivery of such stock certificate(s) and to pay for the Shares evidenced
thereby shall be subject to the following conditions, any one or more of
which
may be waived by the Purchaser: (a) each of the representations and warranties
of the Company and each of its Subsidiaries made herein shall be accurate
as of
the Closing Date; (b) the fulfillment of those undertakings of the Company
and
each of its Subsidiaries to be fulfilled prior to Closing; (c) evidence of
the
completion of the Restructuring, in form and substance satisfactory to the
Placement Agent; (d) each of the Company, the Placement Agent and the Escrow
Agent (as defined herein) executed that certain Escrow Agreement in
substantially the form attached hereto as Exhibit
C;
(e) the
purchase by the Purchasers and the sale by the Company to such Purchasers
of
Shares for an aggregate purchase price of not less than $8,110,000 as of
the
Closing Date; (f) the delivery to the Purchaser of a certificate executed
by the
chief executive officer and the chief financial or accounting officer of
the
Company, dated as of the Closing Date, to the effect that the representations
and warranties of the Company set forth in Section 4 hereto are true and
correct
as of the date of this Agreement and as of the Closing Date and that the
Company
has complied with all the agreements and satisfied all the conditions herein
on
its part to be performed or satisfied on or prior to such Closing Date; (g)
the
execution and delivery of a lockup agreement in the form attached hereto
as
Exhibit
D
by
shareholders of the Company reflected on Exhibit
D
holding
at least 89% of all issued and outstanding shares of Common Stock immediately
prior to the Closing, which shareholders shall include all directors and
executive officers of the Company; and (h) the execution and delivery to
the
Company of a Confidentiality and Non-Competition Agreement in the form attached
as Exhibit
E
hereto
by GordonGraves.
2
Concurrently
with the execution and delivery of this Agreement, the Company, Xxxxx Fargo,
N.A. (the “Escrow Agent”) and the Placement Agent shall enter into the Escrow
Agreement, pursuant to which an escrow account will be established, at the
Company’s expense, for the benefit of the Purchaser (the “Escrow Account”). Not
fewer than two business days following the date hereof, (i) the Purchaser
will
deposit an amount equal to the aggregate purchase price set forth opposite
such
Purchaser’s name in Section 2 hereto in the Escrow Account and (ii) pursuant to
the Escrow Agreement, the Escrow Agent will notify the Company and the Placement
Agent in writing as to the deposit in the Escrow Account by the Purchaser
funds
equal to the proceeds of the sale of Shares to be sold at such Closing to
such
Purchaser (the “Requisite Funds”). On the Closing Date, provided that the
Company previously provides to the Escrow Agent a certificate of the Company’s
Chief Executive Officer and Chief Financial Officer that the conditions to
closing set forth in the previous paragraph have been satisfied or waived,
the
Escrow Agent, pursuant to the terms and conditions of the Escrow Agreement,
shall release the Requisite Funds from the Escrow Account for collection
by the
Company and the Placement Agent as provided in the Escrow
Agreement.
SECTION
4. Representations,
Warranties and Covenants of the Company.
The
Company hereby represents and warrants to, and covenants with, the Purchaser
as
follows:
4.1
Organization
and Qualification.
The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Nevada and the Company is qualified
to
do business as a foreign corporation in each jurisdiction in which qualification
is required, except where failure to so qualify would not reasonably be expected
to have a Material Adverse Effect (as defined herein). The material subsidiaries
of the Company are listed on Exhibit
B
(each a
“Subsidiary” and collectively, the “Subsidiaries”). Each Subsidiary is a direct
or indirect wholly owned subsidiary of the Company. Each Subsidiary is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and is qualified to do business as a foreign
entity
in each jurisdiction in which qualification is required, except where failure
to
so qualify would not reasonably be expected to have a Material Adverse Effect.
For purposes of this Agreement, the term “Material Adverse Effect” shall mean a
material adverse effect upon the business, prospects, financial condition,
properties or results of operations of the Company and its Subsidiaries,
taken
as a whole.
3
4.2
Authorized
Capital Stock.
The
Company has outstanding capital stock as set forth on Schedule 4.2; the issued
and outstanding shares of the Company’s capital stock have been duly authorized
and validly issued, are fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, were not issued in
violation of or subject to any preemptive rights or other rights to subscribe
for or purchase securities, and conform in all material respects to the
description thereof contained in the Company Documents (as defined below).
The
Company does not have outstanding any options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or
sell,
shares of its capital stock or any such options, rights, convertible securities
or obligations. The description of the Company’s stock, stock bonus and other
stock plans or arrangements and the options or other rights granted and
exercised thereunder set forth in the Company Documents accurately and fairly
presents all material information with respect to such plans, arrangements,
options and rights. With respect to each Subsidiary, (i) all the issued and
outstanding shares of each Subsidiary’s capital stock have been duly authorized
and validly issued, are fully paid and nonassessable, have been issued in
compliance with applicable federal and state securities laws, were not issued
in
violation of or subject to any preemptive rights or other rights to subscribe
for or purchase securities, and (ii) there are no outstanding options to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts
or
commitments to issue or sell, shares of the Subsidiary’s capital stock or any
such options, rights, convertible securities or obligations.
4.3
Issuance,
Sale and Delivery of the Shares.
The
Shares and the Conversion Shares have been duly authorized and, when issued,
delivered and paid for in the manner set forth in this Agreement, will be
duly
authorized, validly issued, fully paid and nonassessable and free and clear
of
all pledges, liens, restrictions and encumbrances (other than restrictions
on
transfer under state and/or federal securities laws), and will conform in
all
material respects to the description thereof set forth in the Company Documents.
No preemptive rights or other rights to subscribe for or purchase exist with
respect to the issuance and sale of the Shares and the Conversion Shares
by the
Company pursuant to this Agreement. Except as set forth on Schedule 4.3,
no
stockholder of the Company has any right (which has not been waived or has
not
expired by reason of lapse of time following notification of the Company’s
intent to file the registration statement to be filed by it pursuant to Section
7.1 (the “Registration Statement”)) to require the Company to register the sale
of any shares owned by such stockholder under the Securities Act of 1933,
as
amended (the “Securities Act”) in the Registration Statement. No further
approval or authority of the stockholders or the Board of Directors of the
Company will be required for the issuance and sale of the Shares or the
Conversion Shares to be sold by the Company as contemplated herein. The Company
has reserved from its duly authorized capital stock the maximum number of
shares
of Common Stock issuable pursuant to the conversion of the Shares into the
Conversion Shares.
4
4.4
Due
Execution, Delivery and Performance of this Agreement.
The
Company has full legal right, corporate power and authority to enter into
this
Agreement, the Escrow Agreement, and documents relating to the Restructuring
(the “Restructuring Documents” and, together with the Agreement and the Escrow
Agreement, the “Transaction Documents”) and perform the transactions
contemplated hereby and thereby. The Transaction Documents have been duly
authorized, executed and delivered by the Company. The execution, delivery
and
performance of the Transaction Documents by the Company and the consummation
of
the transactions contemplated herein and therein will not violate any provision
of the certificate of incorporation or bylaws, or other organizational document,
as applicable, of the Company or any of its Subsidiaries and will not result
in
the creation of any lien, charge, security interest or encumbrance upon any
assets of the Company or any of its Subsidiaries pursuant to the terms or
provisions of, and will not (i) conflict with, result in the breach or violation
of, or constitute, either by itself or upon notice or the passage of time
or
both, a default under (A) any agreement, lease, franchise, license, permit
or
other instrument to which the Company or any of its Subsidiaries is a party
or
by which the Company or any of its Subsidiaries or any of their respective
properties may be bound or affected and in each case which would have a Material
Adverse Effect, or (B) to the Company’s knowledge, any statute or any judgment,
decree, order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental body (including, without limitation,
any gaming authority in any State in the United States or foreign country
(collectively, the “Gaming Authorities”)) applicable to the Company or any of
its Subsidiaries or any of their respective properties where such conflict,
breach, violation or default is likely to result in a Material Adverse Effect.
No consent, approval, authorization or other order of any court, regulatory
body, administrative agency or other governmental body, including any Gaming
Authority, is required for the execution and delivery of the Transaction
Documents or the consummation of the transactions contemplated herein and
therein, except for compliance with the blue sky laws and federal securities
laws applicable to the offering of the Shares. Upon the execution and delivery
of the Transaction Documents, and assuming the valid execution thereof by
the
Purchaser and any other party thereto other than the Company or any Subsidiary
or affiliate of the Company, each of the Transaction Documents will constitute
a
valid and binding obligation of the Company or any Subsidiary or affiliate
of
the Company, as the case may be, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered
in
a proceeding in equity or at law) and except as the indemnification agreements
of the Company in Section 7.3 hereof may be limited by federal or state
securities laws or the public policy underlying such laws.
4.5
Accountants.
The
firm of Xxxxxxx Accounting, which has expressed its opinion with respect
to the
consolidated financial statements to be included or incorporated by reference
in
the Registration Statement and the prospectus which forms a part thereof
(the
“Prospectus”), is an independent accountant as required by the Securities Act
and the rules and regulations promulgated thereunder (the “Rules and
Regulations”). The firm of Xxxxxx and Xxxxxxx, LLP, which has expressed its
opinion with respect to the consolidated financial statements of Goodtime,
is an
independent accountant as required by the Securities Act and the Rules and
Regulations.
5
4.6
No
Defaults.
Neither
the Company nor any of its Subsidiaries is in violation or default of any
provision of its certificate of incorporation or bylaws, or other organizational
documents, as applicable, or in breach of or default with respect to any
provision of any agreement, judgment, decree, order, lease, franchise, license,
permit or other instrument to which it is a party or by which it or any of
its
properties are bound which could reasonably be expected to have a Material
Adverse Effect and there does not exist any state of facts which, with notice
or
lapse of time or both, would constitute an event of default on the part of
the
Company or any of its Subsidiaries as defined in such documents and which
would
have a Material Adverse Effect.
4.8
No
Actions.
There
are no legal or governmental actions, suits or proceedings pending and to
the
Company’s knowledge, there are no inquiries or investigations, nor are there any
legal or governmental actions, suits, or proceedings threatened (including,
without limitation, by any Gaming Authority) to which the Company or any
of its
Subsidiaries is or may be a party or of which property owned or leased by
the
Company or any of its Subsidiaries is or may be the subject, or related to
environmental or discrimination matters, which actions, suits or proceedings,
individually or in the aggregate, might reasonably be expected to have a
Material Adverse Effect; and no labor disturbance by the employees of the
Company exists or, to the Company’s knowledge, is imminent which might
reasonably be expected to have a Material Adverse Effect. Neither the Company
nor any of its Subsidiaries is party to or subject to the provisions of any
injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body (including, without limitation,
by any Gaming Authority) which might reasonably be expected to have a Material
Adverse Effect.
4.9
Properties.
The
Company and the Subsidiaries have good and marketable title to all properties
and assets reflected as owned in the financial statements of the Company
and the
Subsidiary Financial Statements (as defined herein), subject to no lien,
mortgage, pledge, charge or encumbrance of any kind except (i) those, if
any,
reflected in the financial statements of the Company and the Subsidiary
Financial Statements, or (ii) those which are not material in amount and
do not
adversely affect the use of such property by the Company and its Subsidiaries.
Each of the Company and its Subsidiaries holds its leased properties under
valid
and binding leases, with such exceptions as are not materially significant
in
relation to its business taken as a whole. The Company leases all such
properties as are necessary to its operations as now conducted.
6
4.10
No
Material Change.
Except
as set forth on Schedule 4.10, since October 30, 2005 (i) the Company and
its
Subsidiaries have not incurred any material liabilities or obligations,
indirect, or contingent, or entered into any material oral or written agreement
or other transaction which is not in the ordinary course of business or which
could reasonably be expected to result in a material reduction in the future
earnings of the Company and its Subsidiaries; (ii) the Company and its
Subsidiaries have not sustained any material loss or interference with their
businesses or properties from fire, flood, windstorm, accident or other calamity
not covered by insurance; (iii) the Company and its Subsidiaries have not
paid
or declared any dividends or other distributions with respect to their capital
stock and neither the Company nor any of its Subsidiaries is in default in
the
payment of principal or interest on any outstanding debt obligations; (iv)
there
has not been any change in the capital stock of the Company or any of its
Subsidiaries other than the sale of the Shares hereunder, shares or options
issued pursuant to employee equity incentive plans or purchase plans approved
by
the Company’s Board of Directors and repurchases of shares or options pursuant
to repurchase plans already approved by the Company's Board of Directors,
or
indebtedness not incurred in the ordinary course of business that is material
to
the Company and its Subsidiaries, taken as a whole; and (v) there has not
been
any change in the accounting principles applied by the Company or any of
its
Subsidiaries in the preparation of the financial statements of the Company
and
its Subsidiaries other than changes in accordance with generally accepted
accounting principles. Since October 30, 2005, there has not been any event
which has caused a Material Adverse Effect.
4.11 Intellectual
Property.
(i)
Each of the Company and its Subsidiaries owns or has obtained valid and
enforceable licenses or options for the inventions, patent applications,
patents, trademarks (both registered and unregistered), trade names, copyrights
and trade secrets necessary for the conduct of its business as currently
conducted (collectively, the “Intellectual Property”); and (ii) (a) there are no
third parties who have any ownership rights to any Intellectual Property
that is
owned by, or has been licensed to, the Company or its Subsidiaries for the
products that would preclude the Company or its Subsidiaries from conducting
its
business as currently conducted and have a Material Adverse Effect, except
for
the ownership rights of the owners of the Intellectual Property licensed
or
optioned by the Company or its Subsidiaries; (b) to the Company’s knowledge,
there are currently no sales of any products that would constitute an
infringement by third parties of any Intellectual Property owned, licensed
or
optioned by the Company or its Subsidiaries, which infringement would have
a
Material Adverse Effect; (c) there is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by others challenging the rights
of
the Company or its Subsidiaries in or to any Intellectual Property owned,
licensed or optioned by the Company or its Subsidiaries, other than claims
which
would not reasonably be expected to have a Material Adverse Effect; (d) there
is
no pending or, to the Company’s knowledge, threatened action, suit, proceeding
or claim by others challenging the validity or scope of any Intellectual
Property owned, licensed or optioned by the Company or its Subsidiaries,
other
than non-material actions, suits, proceedings and claims; and (e) there is
no
pending or, to the Company’s knowledge, threatened action, suit, proceeding or
claim by others that the Company any of its Subsidiaries infringes or otherwise
violates any patent, trademark, copyright, trade secret or other proprietary
right of others, other than non-material actions, suits, proceedings and
claims.
7
4.12
Compliance.
Neither
the Company nor any of its Subsidiaries has been advised, nor has reason
to
believe, that it is not conducting its business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it is
conducting its business, including, without limitation, all applicable local,
state and federal environmental laws and regulations and the rules and
regulations of any Gaming Authority; except where failure to be so in compliance
would not have a Material Adverse Effect.
4.13
Taxes.
Each of
the Company and its Subsidiaries has filed all necessary federal, state and
foreign income and franchise tax returns and has paid or accrued all taxes
shown
as due thereon, and neither the Company nor any of its Subsidiaries has
knowledge of a tax deficiency which has been or might be asserted or threatened
against it which might reasonably be expected to have a Material Adverse
Effect.
4.14
Investment
Company.
The
Company is not an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for an investment company, within the
meaning of the Investment Company Act of 1940, as amended.
4.15
Offering
Materials.
Except
for the Company Documents, the Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection
with
the offering and sale of the Shares. Neither the Company nor any person acting
on its behalf has in the past or will hereafter take any action independent
of
the Placement Agent to sell, offer for sale or solicit offers to buy any
securities of the Company which would subject the offer, issuance or sale
of the
Shares, as contemplated by the Transaction Documents, to the registration
requirements of Section 5 of the Securities Act.
4.16
Insurance.
The
Company and its Subsidiaries maintain insurance of the types and in the amounts
that the Company reasonably believes is adequate for their businesses,
including, but not limited to, insurance covering all real and personal property
leased by the Company and its Subsidiaries against theft, damage, destruction,
acts of vandalism and all other risks customarily insured against by similarly
situated companies, all of which insurance is in full force and effect.
4.17
Additional
Information.
The
information contained in the offering materials provided to the investors
and
the following documents (all of which are referred to collectively as the
“Company Documents”), which the Placement Agent has furnished to the Purchaser,
or will furnish prior to the Closing, did not as of the date of the applicable
document, include any untrue statement of a material fact or omit to state
any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances in which they were made, not
misleading, as of their respective filing dates or if amended, as so amended:
8
(a)
the
Company’s Annual Report on Form 10-K for the year ended December 31, 2005;
(b)
the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31,
2006;
(c)
the
Company’s prospectus filed with the Commission on November 12, 2003,
Post-Effective Amendment No. 1 to the Registration Statement on Form SB-2/A
filed with the Commission on February 3, 2004 and Post-Effective Amendment
No. 2
to the Registration Statement on Form SB-2/A filed with the Commission on
February 17, 2004; and
(d)
all
other
documents, if any, filed by the Company with the Commission since December
31,
2005 pursuant to the reporting requirements of the Securities Exchange Act
of
1934, as amended (the “Exchange Act”).
4.18
Price
of Common Stock.
The
Company has not taken, and will not take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of
the
price of the shares of the Common Stock to facilitate the sale or resale
of the
Conversion Shares.
4.19
Certificate.
At the
Closing, the Company will deliver to Purchasers a certificate executed by
the
chief executive officer and the chief financial or accounting officer of
the
Company, dated as of the Closing Date, in form and substance reasonably
satisfactory to the Purchasers, to the effect that representations and
warranties of the Company and each of its Subsidiaries set forth in Section
4
hereto are true and correct as of the date of this Agreement and as of the
Closing Date and that the Company and each of its Subsidiaries has complied
with
all the agreements and satisfied all the conditions herein on its part to
be
performed or satisfied on or prior to such Closing Date. At the Closing,
the
Company shall cause each of its Subsidiaries to deliver to Purchasers a
certificate executed by officers of each such Subsidiary, dated as of the
Closing Date, in form and substance reasonably satisfactory to the Purchasers,
to the effect that representations and warranties of such Subsidiary set
forth
in Section 4 hereto are true and correct as of the date of this Agreement
and as
of the Closing Date and that such Subsidiary has complied with all the
agreements and satisfied all the conditions herein on its part to be performed
or satisfied on or prior to such Closing Date. At the Closing, the Company
will
deliver to Purchasers a certificate executed by the secretary of the Company,
dated as of the Closing Date, in form and substance reasonably satisfactory
to
the Purchasers.
4.20
Evidence
of Completion of Corporate Transactions.
At the
Closing, the Company will deliver to the Placement Agent evidence of the
completion of the Restructuring, in form and substance satisfactory to the
Placement Agent.
4.21
Reporting
Company; Form S-1.
The
Company is subject to the reporting requirements of the Exchange Act. The
Company is eligible to register the Conversion Shares for resale by the
Purchaser on a registration statement on Form S-1 or Form SB-2 under the
Securities Act. There exist no facts or circumstances (including without
limitation any required approvals or waivers or any circumstances that may
delay
or prevent the obtaining of accountant’s consents) that reasonably could be
expected to prohibit or delay the preparation and filing of a registration
statement on Form S-1 or Form SB-2 that will be available for the resale
of the
Conversion Shares by the Purchaser.
9
4.22
Use
of
Proceeds.
The
Company shall use the proceeds from the sale of Shares as set forth on Schedule
4.22.
4.23
Non-Public
Information.
On or
before 9:00 a.m., New York City time, on or before the fourth business day
after
the Closing Date, the Company shall file a Current Report on Form 8-K describing
the material terms of the transactions contemplated by the Transaction
Documents, and attaching as an exhibit to such Form 8-K a form of this Agreement
and the Restructuring Documents (including such exhibit, the “8-K Filing”). The
Company shall not, and shall use its best efforts to cause each of its officers,
directors, employees and agents not to, provide the Purchaser with any material
nonpublic information regarding the Company from and after the filing of
the 8-K
Filing without the express written consent of the Purchaser. The Company
understands and confirms that the Purchaser will rely on the representations
and
covenants set forth in this section in effecting transactions in securities
of
the Company.
4.24
Use
of
Purchaser Name.
Except
as may be required by applicable law or regulation, the Company shall not
use
the Purchaser’s name or the name of any of its affiliates in any advertisement,
announcement, press release or other similar public communication unless
it has
received the prior written consent of the Purchaser for the specific use
contemplated or as otherwise required by applicable law or
regulation.
4.25
Related
Party Transactions.
Except
as set forth on Schedule 4.25, no transaction has occurred between or among
the
Company, any of the Subsidiaries and their affiliates, officers or directors
or
any affiliate or affiliates of any such officer or director that is required
to
have been described under applicable securities laws in the Company Documents
and is not so described in such filings.
4.26
Off-Balance
Sheet Arrangements.
There
is no transaction, arrangement or other relationship between the Company
and an
unconsolidated or other off-balance sheet entity that is required to be
disclosed by the Company in the Company Documents and is not so disclosed
or
that otherwise would be reasonably likely to have a Material Adverse Effect.
There are no such transactions, arrangements or other relationships with
the
Company that may create contingencies or liabilities that are not otherwise
disclosed by the Company in the Company Documents.
10
4.27
Governmental
Permits, Etc.
Each of
the Company and its Subsidiaries has all franchises, licenses, certificates
and
other authorizations from such federal, state or local government or
governmental agency, department or body that are currently required for the
operation of the business of the Company and its Subsidiaries as currently
conducted, including without limitation all such licenses, certificates,
authorizations and permits required by any Gaming Authority, except where
the
failure to posses currently such franchises, licenses, certificates and other
authorizations is not reasonably expected to have a Material Adverse Effect.
The
Company and each of its Subsidiaries is in compliance with all applicable
federal, state, local and foreign laws, regulations, orders and decrees
governing its business as prescribed by any Gaming Authority, or any other
federal, state or foreign agencies or bodies engaged in the regulation of
gaming, except where noncompliance would not, individually or in the aggregate,
have a Material Adverse Effect. The Company and its Subsidiaries have not
received any notice of proceedings relating to the revocation or modification
of
any such permit which, if the subject of an unfavorable decision, ruling
or
finding, could reasonably be expected to have a Material Adverse Effect.
No
Gaming Authority has issued any order or decree or is otherwise impairing,
restricting or prohibiting the continuation of the business of the Company
and
each of its Subsidiaries as is presently being conducted or contemplated.
No
event has occurred that allows, or after notice or lapse of time would allow,
revocation or termination by the issuer thereof or that results in any other
material impairment of the rights of the holder of any other material impairment
of the rights of the holder of any such franchises, licenses, certificates
and
other authorizations. Such franchises, licenses, certificates and other
authorizations contain no restrictions that are materially burdensome to
the
Company or any of the Subsidiaries in light of their respective business,
and
the Company has no reason to believe that any governmental body or agency
is
considering limiting, suspending or revoking any such franchises, licenses,
certificates and other authorizations. Neither the Company nor its management
has any reasonable basis to believe that any franchises, licenses, certificates
and other authorizations necessary in the future to conduct the business
of the
Company or any Subsidiary as described in the Company Documents will not
be
granted upon application, or that any Gaming Authority or any other governmental
agencies are investigating the Company or any Subsidiary or any of their
officers, directors, key employees, security holders or affiliated companies,
other than in ordinary course administrative review or in review of the
transactions contemplated hereby.
4.28
Financial
Statements.
The
Company has provided to the Purchaser the audited financial statements of
its
Subsidiaries set forth on Schedule 4.28(a) (the “Subsidiary Financial
Statements”). Each of the Subsidiary Financial Statements and the consolidated
financial statements of the Company and the related notes contained in each
of
the Subsidiary Financial Statements and in the Company’s Exchange Act filings
present fairly, in accordance with generally accepted accounting principles,
the
financial position of the Company and its Subsidiaries as of the dates
indicated, and the results of their operations, cash flows and the changes
in
stockholders’ equity for the periods therein specified, subject, in the case of
unaudited financial statements for interim periods, to normal year-end audit
adjustments. The Subsidiary Financial Statements and the Company’s financial
statements (including the related notes) have been prepared in accordance
with
generally accepted accounting principles applied on a consistent basis
throughout the periods therein specified, except that unaudited financial
statements may not contain all footnotes required by generally accepted
accounting principles. The consolidated financial statements of Goodtime
and the
related notes thereto set forth on Schedule 4.28(b) present fairly, in
accordance with generally accepted accounting principles, the consolidated
financial position of Goodtime and its subsidiaries as of the dates indicated,
and the results of their operations, cash flows and the changes in stockholders’
equity for the periods therein specified, subject, in the case of unaudited
financial statements for interim periods, to normal year-end audit adjustments.
Such consolidated financial statements (including the related notes) have
been
prepared in accordance with generally accepted accounting principles applied
on
a consistent basis throughout the periods therein specified, except that
unaudited financial statements may not contain all footnotes required by
generally accepted accounting principles. The unaudited pro forma financial
statements and the related notes thereto set forth on Schedule 4.28(c), giving
effect to the Restructuring, present fairly the information contained therein,
have been prepared in accordance with the Commission’s rules and guidelines with
respect to pro forma financial statements and have been properly presented
on
the bases described therein, and the assumptions used in the preparation
thereof
are reasonable and the adjustments used therein are appropriate to give effect
to the transactions referred to therein.
11
4.29
Xxxxxxxx-Xxxxx
Act.
The
Company and each of its Subsidiaries is, and at the Closing Date will be,
in
compliance with all provisions of the Xxxxxxxx-Xxxxx Act of 2002 which are
applicable to it. The Company maintains a system of internal accounting controls
that the Company and each of its Subsidiaries reasonably believes are sufficient
to provide reasonable assurance that: (i) transactions are executed in
accordance with management’s general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to
maintain accountability for assets; (iii) access to assets is permitted only
in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
4.30
Listing.
The
Company has not, in the two years preceding the date hereof, received any
notice
(written or oral) from the New York Stock Exchange, the American Stock Exchange,
the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board
(each
a “Trading Market”), or any stock exchange, market or trading facility to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such exchange, market or trading facility. The Company shall
comply with all requirements of any Trading Market on which the Common Stock
and
the Conversion Shares may be listed or quoted. The Company shall use its
best
efforts to have the Common Stock and the Conversion Shares traded in the
over-the-counter market as reported by Pink Sheets, LLC (or any similar
organization or agency succeeding to its functions of reporting prices) on
or
before the first date that the Registration Statement is declared effective
by
the Commission.
4.31
Foreign
Corrupt Practices.
Neither
the Company, nor any of its Subsidiaries, nor, to the knowledge of the Company,
any director, officer, agent, employee or other Person acting on behalf of
the
Company or any of its Subsidiaries has, in the course of its actions for,
or on
behalf of, the Company (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; (ii) made any direct or indirect unlawful payment to
any
foreign or domestic government official or employee from corporate funds;
(iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign
or
domestic government official or employee.
4.32
Employee
Relations.
(a)
Neither the Company nor any of its Subsidiaries is a party to any collective
bargaining agreement or employs any member of a union. The Company and its
Subsidiaries believe that their relations with their employees are good.
No
executive officer of the Company (as defined in Rule 501(f) of the Securities
Act) has notified the Company that such officer intends to leave the Company
or
otherwise terminate such officer’s employment with the Company. No executive
officer of the Company, to the knowledge of the Company, is, or is now expected
to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant between such person and the Company or any of its Subsidiaries,
and the
continued employment of each such executive officer does not subject the
Company
or any of its Subsidiaries to any liability with respect to any of the foregoing
matters.
12
4.33
ERISA.
The
Company is in compliance, in all material respects, with all presently
applicable provisions of the Employee Retirement Income Security Act of 1974,
as
amended, including the regulations and published interpretations thereunder
(“ERISA”); no “reportable event” (as defined in ERISA) has occurred with respect
to any “pension plan” (as defined in ERISA) for which the Company would have any
liability; the Company has not incurred and does not expect to incur liability
under (i) Title (IV) of ERISA with respect to termination of, or withdrawal
from, any “pension plan” or (ii) Sections 412 or 4917 of the Internal Revenue
Code of 1986, as amended, including the regulations and published
interpretations thereunder (the “Code”); and each “pension plan” for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which, in each case, would
cause the loss of such qualification, except as would not reasonably be expected
to have a Material Adverse Effect.
4.34
Environmental
Matters.
There
has been no storage, disposal, generation, manufacture, transportation, handling
or treatment of toxic wastes, hazardous wastes or hazardous substances by
the
Company or to its knowledge, any of its Subsidiaries (or, to the knowledge
of
the Company, any of their predecessors in interest) at, upon or from any
of the
property now or previously owned or leased by the Company or any of its
Subsidiaries in violation of any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit or which would require remedial action
under
any applicable law, ordinance, rule, regulation, order, judgment, decree
or
permit; there has been no material spill, discharge, leak, emission, injection,
escape, dumping or release of any kind into such property or into the
environment surrounding such property of any toxic wastes, medical wastes,
solid
wastes, hazardous wastes or hazardous substances due to or caused by the
Company
or any of its Subsidiaries or with respect to which the Company or any of
its
Subsidiaries have knowledge; the terms “hazardous wastes”, “toxic wastes”,
“hazardous substances”, and “medical wastes” shall have the meanings specified
in any applicable local, state, federal and foreign laws or regulations with
respect to environmental protection.
4.35
Equal
Treatment of Purchasers.
Each
Purchaser has entered into the Agreement on materially equivalent terms.
No
consideration shall be offered or paid to any person to amend or consent
to a
waiver or modification of any provision of any of this Agreement unless the
same
consideration is also offered to all of the parties to the Agreements. For
clarification purposes, this provision constitutes a separate right granted
to
each Purchaser by the Company and negotiated separately by each Purchaser,
and
is intended to treat for the Company the Purchasers as a class and shall
not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of the Shares and the Conversion
Shares or otherwise.
13
4.36
No
Integration.
Neither
the Company, nor any of its affiliates, nor, to the Company’s knowledge, any
person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security
that
would cause this offering of the Shares to be integrated with prior offerings
by
the Company for purposes of the Securities Act or any applicable stockholder
approval provisions nor will the Company or any of its subsidiaries take
any
action or steps that would cause the offering of the Shares to be integrated
with other offerings.
4.37
No
Fiduciary Duty.
The
Placement Agent and the Purchaser are acting as principals and not as an
agent
or fiduciary of the Company and each of its Subsidiaries and the engagement
of
Xxxxxxxx Curhan Ford & Co. in connection with the offering of the Shares is
as independent contractors and not in any other capacity. Furthermore, the
Company agrees that it is solely responsible for independently making its
own
judgments in connection with the offering of the Shares (irrespective of
whether
any Placement Agent or the Purchaser has advised or are currently advising
the
Company on related or other matters).
SECTION
5. Representations,
Warranties and Covenants of the Purchaser.
i)The
Purchaser represents and warrants to, and covenants with, the Company that:
(i)
the Purchaser is knowledgeable, sophisticated and experienced in making,
and is
qualified to make, decisions with respect to investments in shares representing
an investment decision like that involved in the purchase of the Shares,
including investments in securities issued by the Company and comparable
entities, and the Purchaser has undertaken an independent analysis of the
merits
and the risks of an investment in the Shares, based on the Purchaser’s own
financial circumstances; (ii) the Purchaser has had the opportunity to request,
receive, review and consider all information it deems relevant in making
an
informed decision to purchase the Shares and to ask questions of, and receive
answers from, the Company concerning such information; (iii) the Purchaser
is
acquiring the number of Shares set forth in Section 2 above in the ordinary
course of its business and for its own account for investment only and with
no
present intention of distributing any of such Shares or any arrangement or
understanding with any other persons regarding the distribution of such Shares
(this representation and warranty not limiting the Purchaser’s right to sell
pursuant to the Registration Statement or in compliance with the Securities
Act
and the Rules and Regulations, or, other than with respect to any claims
arising
out of a breach of this representation and warranty, the Purchaser’s right to
indemnification under Section 7.3); (iv) the Purchaser will not, directly
or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any
of the
Shares, nor will the Purchaser engage in any short sale that results in a
disposition of any of the Shares by the Purchaser, except in compliance with
the
Securities Act and the Rules and Regulations and any applicable state securities
laws; (v) the Purchaser has completed or caused to be completed the Registration
Statement Questionnaire attached hereto as part of Appendix I, for use in
preparation of the Registration Statement, and the answers thereto are true
and
correct as of the date hereof and will be true and correct as of the effective
date of the Registration Statement and the Purchaser will notify the Company
immediately of any material change in any such information provided in the
Registration Statement Questionnaire until such time as the Purchaser has
sold
all of its Shares or Conversion Shares or until the Company is no longer
required to keep the Registration Statement effective; (vi) the Purchaser
has,
in connection with its decision to purchase the number of Shares set forth
in
Section 2 above, relied solely upon the Company Documents and the documents
included therein or incorporated by reference and the representations and
warranties of the Company contained herein, the Purchaser has not relied
on the
Placement Agent in negotiating the terms of its investment in the Shares
and, in
making a decision to purchase the Shares, the Purchaser has not received
or
relied on any communication, investment advice or recommendation from the
Placement Agent; (vii) the Purchaser has had an opportunity to discuss this
investment with representatives of the Company and ask questions of them;
(viii)
the Purchaser is an institutional “accredited investor” within the meaning of
Rule 501(a) of Regulation D promulgated under the Securities Act; and (ix)
the
Purchaser agrees to notify the Company immediately of any change in any of
the
foregoing information until such time as the Purchaser has sold all of its
Shares or Conversion Shares or the Company is no longer required to keep
the
Registration Statement effective.
14
(b)
The
Purchaser understands that the Shares are being offered and sold to it in
reliance upon specific exemptions from the registration requirements of the
Securities Act, the Rules and Regulations and state securities laws and that
the
Company is relying upon the truth and accuracy of, and the Purchaser’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Purchaser set forth herein in order to determine
the
availability of such exemptions and the eligibility of the Purchaser to acquire
the Shares.
(c)
For
the
benefit of the Company, the Purchaser previously agreed orally with the
Placement Agent to keep confidential all information concerning this private
placement. The Purchaser understands that the existence and nature of all
conversations and presentations, if any, regarding the Company and this offering
must be kept strictly confidential. The Purchaser understands that the federal
securities laws impose restrictions on trading based on information regarding
this offering. In addition, the Purchaser hereby acknowledges that unauthorized
disclosure of information regarding this offering may result in a violation
of
Regulation FD. This obligation will terminate upon the filing by the Company
of
a press release or press releases describing this offering. In addition to
the
above, the Purchaser shall maintain in confidence the receipt and content
of any
notice of a Suspension (as defined in Section 5(h) below). The foregoing
agreements shall not apply to any information that is or becomes publicly
available through no fault of the Purchaser, or that the Purchaser is legally
required to disclose; provided, however, that if the Purchaser is requested
or
ordered to disclose any such information pursuant to any court or other
government order or any other applicable legal procedure, it shall provide
the
Company with prompt notice of any such request or order in time sufficient
to
enable the Company to seek an appropriate protective order.
(d)
The
Purchaser understands that its investment in the Shares involves a significant
degree of risk, including a risk of total loss of the Purchaser’s investment,
and the Purchaser has full cognizance of and understands all of the risk
factors
related to the Purchaser’s purchase of the Shares. The Purchaser understands
that the market price of the Common Stock can be volatile and that no
representation is being made as to the future value of the Common Stock.
The
Purchaser has the knowledge and experience in financial and business matters
as
to be capable of evaluating the merits and risks of an investment in the
Shares
and has the ability to bear the economic risks of an investment in the Shares.
15
(e)
The
Purchaser understands that no United States federal or state agency or any
other
government or governmental agency has passed upon or made any recommendation
or
endorsement of the Shares or the Conversion Shares.
(f)
The
Purchaser understands that, until such time as the Registration Statement
has
been declared effective or the Shares or the Conversion Shares may be sold
pursuant to Rule 144 under the Securities Act without any restriction as
to the
number of securities as of a particular date that can then be immediately
sold,
the Shares or the Conversion Shares will bear a restrictive legend in
substantially the following form:
“The
securities evidenced by this certificate have not been registered under the
Securities Act of 1933, as amended (the “Securities Act”), or the securities
laws of any state or other jurisdiction. The securities may not be offered,
sold, pledged or otherwise transferred except (1) pursuant to an exemption
from
registration under the Securities Act or (2) pursuant to an effective
registration statement under the Securities Act, in each case in accordance
with
all applicable securities laws of the United States and other jurisdictions,
and
in the case of a transaction exempt from registration, unless the Company
has
received an opinion of counsel reasonably satisfactory to it that such
transaction does not require registration under the Securities Act and such
other applicable laws.”
(g)
The
Purchaser’s principal executive offices are in the jurisdiction set forth
immediately below the Purchaser’s name on the signature pages hereto.
(h)
The
Purchaser hereby covenants with the Company not to make any sale of the
Conversion Shares under the Registration Statement without complying with
the
provisions of this Agreement and without effectively causing the prospectus
delivery requirement under the Securities Act to be satisfied (whether
physically or through compliance with Rule 172 under the Securities Act or
any
similar rule), and the Purchaser acknowledges and agrees that such Conversion
Shares are not transferable on the books of the Company unless the certificate
submitted to the transfer agent evidencing the Conversion Shares is accompanied
by a separate Purchaser’s Certificate of Subsequent Sale: (i) in the form of
Appendix II hereto, (ii) executed by an officer of, or other authorized person
designated by, the Purchaser, and (iii) to the effect that (A) the Conversion
Shares have been sold in accordance with the Registration Statement, or the
Shares and the Conversion Shares have been sold in accordance with the
Securities Act and any applicable state securities or blue sky laws and (B)
the
prospectus delivery requirement of effectively has been satisfied. The Purchaser
will notify the Company promptly after the sale of all of its Shares and/or
Conversion Shares. The Purchaser acknowledges that there may occasionally
be
times when the Company must suspend the use of the Prospectus forming a part
of
the Registration Statement (a “Suspension”) until such time as an amendment to
the Registration Statement has been filed by the Company and declared effective
by the Commission, or until such time as the Company has filed an appropriate
report with the Commission pursuant to the Exchange Act. Without the Company’s
prior written consent, which consent shall not be unreasonably withheld or
delayed, the Purchaser shall not use any written materials to offer the
Conversion Shares for resale other than the prospectus provided by the Company,
and shall not create or disseminate any “free writing prospectus” (as defined in
the Rules and Regulations) relating to the Conversion Shares. The Purchaser
hereby covenants that it will not sell any Conversion Shares pursuant to
said
Prospectus during the period commencing at the time at which the Company
gives
the Purchaser written notice of the Suspension of the use of said Prospectus
and
ending at the time the Company gives the Purchaser written notice that the
Purchaser may thereafter effect sales pursuant to said Prospectus.
Notwithstanding the foregoing, the Company agrees that no Suspension shall
be
for a period of longer than 60 consecutive days, and no Suspensions shall
be for
a period of longer than 90 days in the aggregate in any 12-month
period.
16
(i)
The
Purchaser further represents and warrants to, and covenants with, the Company
that (i) the Purchaser has full right, power, authority and capacity to enter
into this Agreement and to consummate the transactions contemplated hereby
and
has taken all necessary action to authorize the execution, delivery and
performance of this Agreement, (ii) the making and performance of this Agreement
by the Purchaser and the consummation of the transactions herein contemplated
will not violate any provision of the organizational documents of the Purchaser
or conflict with, result in the breach or violation of, or constitute, either
by
itself or upon notice or the passage of time or both, a default under any
material agreement, mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument to which the Purchaser is a party,
or any
statute or any authorization, judgment, decree, order, rule or regulation
of any
court or any regulatory body, administrative agency or other governmental
body
applicable to the Purchaser, (iii) no consent, approval, authorization or
other
order of any court, regulatory body, administrative agency or other governmental
body is required on the part of the Purchaser for the execution and delivery
of
this Agreement or the consummation of the transactions contemplated by this
Agreement, (iv) upon the execution and delivery of this Agreement, this
Agreement shall constitute a legal, valid and binding obligation of the
Purchaser, enforceable in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors’ and contracting parties’ rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding
in
equity or at law) and except to the extent enforcement of the indemnification
provisions, set forth in Section 7.3 of this Agreement, may be limited by
federal or state securities laws or the public policy underlying such laws,
and
(v) there is not in effect any order enjoining or restraining the Purchaser
from
entering into or engaging in any of the transactions contemplated by this
Agreement.
SECTION
6. Survival
of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement or
by the
Placement Agent, all covenants, agreements, representations and warranties
made
by the Company, each of its Subsidiaries and the Purchaser herein and in
the
certificates for the Shares delivered pursuant hereto shall survive the
execution of this Agreement, the delivery to the Purchaser of the Shares
being
purchased and the payment therefore.
SECTION
7. Registration
of the Shares; Compliance with the Securities Act.
|
7.1
|
Registration
Procedures and Expenses.
The
Company shall:
|
17
(a)
as
soon
as reasonably practicable, but in no event later than 30 days following the
Closing Date (the “Filing Date”), prepare and file with the Commission the
Registration Statement on Form S-1 or Form SB-2 relating to the sale of the
Conversion Shares by the Purchaser and the Other Purchasers from time to
time in
the over-the-counter market as reported by Pink Sheets, LLC (or any similar
organization or agency succeeding to its functions of reporting prices) or
the
facilities of any Trading Market on which the Common Stock is then traded
or in
privately-negotiated transactions;
(b)
use
its
best efforts, subject to receipt of necessary information from the Purchasers,
to cause the Commission to declare the Registration Statement effective within
150 days after the Closing Date (the “Required Effective Date”);
(c)
use
its
best efforts to promptly prepare and file with the Commission such amendments
and supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to keep the Registration Statement
effective
until
the earliest of (i) two years after the effective date of the Registration
Statement, (ii) the date all Conversion Shares are sold pursuant to the
Registration Statement, or (iii) such time as the Conversion Shares become
eligible for resale by non-affiliates pursuant to Rule 144(k) under the
Securities Act of 1933, as amended;
(d)
furnish
to the Purchaser with respect to the Conversion Shares registered under the
Registration Statement (and to each underwriter, if any, of such Conversion
Shares) such number of copies of prospectuses and such other documents as
the
Purchaser may reasonably request, in order to facilitate the public sale
or
other disposition of all or any of the Conversion Shares by the Purchaser;
(e)
file
documents required of the Company for normal Blue Sky clearance in states
specified in writing by the Purchaser; provided,
however,
that
the Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified
or
has not so consented;
(f)
bear
all
expenses in connection with the procedures in paragraphs (a) through (e)
of this
Section 7.1 and the registration of the Conversion Shares pursuant to the
Registration Statement, other than fees and expenses, if any, of counsel
or
other advisers to the Purchaser or the Other Purchasers or underwriting
discounts, brokerage fees and commissions incurred by the Purchaser or the
Other
Purchasers, if any;
(g)
file
a
Form D with respect to the Shares as required under Regulation D and to provide
a copy thereof to the Purchaser promptly after filing;
(h) issue
a
press release or a Current Report on Form 8-K as may be required under the
Exchange Act describing the transactions contemplated by this Agreement and
the
Restructuring Documents on the Closing Date; and
(i)
make
available, while the Registration Statement is effective and available for
resale, its Chief Executive Officer, Chief Financial Officer, and Chief
Administrative Officer for questions regarding information which the Purchaser
may reasonably request in order to fulfill any due diligence obligation on
its
part.
18
The
Company understands that the Purchaser disclaims being an underwriter, but
the
Purchaser being deemed an underwriter shall not relieve the Company of any
obligations it has hereunder. A questionnaire related to the Registration
Statement to be completed by the Purchaser is attached hereto as Appendix
I.
7.2
Transfer
of Shares and Conversion Shares After Registration.
The
Purchaser agrees that it will not effect any disposition of the Shares or
the
Conversion Shares or its right to purchase the Shares or the Conversion Shares
that would constitute a sale within the meaning of the Securities Act or
any
applicable state securities laws, except as contemplated in the Registration
Statement referred to in Section 7.1 or as otherwise permitted by law, and
that
it will promptly notify the Company of any changes in the information set
forth
in the Registration Statement regarding the Purchaser or its plan of
distribution.
|
7.3
|
Indemnification.
For the purpose of this Section 7.3:
|
(i) the
term
“Purchaser/Affiliate” shall mean any affiliate of the Purchaser, including a
transferee who is an affiliate of the Purchaser, and any person who controls
the
Purchaser or any affiliate of the Purchaser within the meaning of Section
15 of
the Securities Act or Section 20 of the Exchange Act; and
(ii)
the
term
“Registration Statement” shall include any preliminary prospectus, final
prospectus, free writing prospectus, exhibit, supplement or amendment included
in or relating to, and any document incorporated by reference in, the
Registration Statement referred to in Section 7.1.
(a)
The
Company agrees to indemnify and hold harmless each Purchaser and each
Purchaser/Affiliate against any losses, claims, damages, liabilities or
expenses, joint or several, to which such Purchaser or Purchaser/Affiliate
may
become subject, under the Securities Act, the Exchange Act, or any other
federal
or state statutory law or regulation, or at common law or otherwise (including
in settlement of any litigation, if such settlement is effected with the
prior
written consent of the Company), insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, including the
Prospectus, financial statements and schedules, and all other documents filed
as
a part thereof, as amended at the time of effectiveness of the Registration
Statement, including any information deemed to be a part thereof as of the
time
of effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to Rules
430B, 430C or 434, of the Rules and Regulations, or the Prospectus, in the
form
first filed with the Commission pursuant to Rule 424(b) of the Regulations,
or
filed as part of the Registration Statement at the time of effectiveness
if no
Rule 424(b) filing is required, or any amendment or supplement thereto, or
arise
out of or are based upon the omission or alleged omission to state in any
of
them a material fact required to be stated therein or necessary to make the
statements in any of them, in light of the circumstances under which they
were
made, not misleading, or arise out of or are based in whole or in part on
any
inaccuracy in the representations or warranties of the Company contained
in this
Agreement, or any failure of the Company to perform its obligations hereunder
or
under law, and will promptly reimburse each such Purchaser and each such
Purchaser/Affiliate for any legal and other expenses as such expenses are
reasonably incurred by such Purchaser or such Purchaser/Affiliate in connection
with investigating, defending or preparing to defend, settling, compromising
or
paying any such loss, claim, damage, liability, expense or action; provided,
however,
that
the Company will not be liable in any such case to the extent, but only to
the
extent, that any such loss, claim, damage, liability or expense arises out
of or
is based upon (i) an untrue statement or alleged untrue statement or omission
or
alleged omission made in the Registration Statement, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Purchaser expressly
for use therein, or (ii) the failure of such Purchaser to comply with the
covenants and agreements contained in Sections 5 or 7.2, or (iii) the inaccuracy
of any representation or warranty made by such Purchaser herein or (iv) any
statement or omission in any Prospectus that is corrected in any subsequent
Prospectus that was delivered to the Purchaser prior to the pertinent sale
or
sales by the Purchaser.
19
(b)
Each
Purchaser will severally indemnify and hold harmless the Company, each of
its
directors, each of its executive officers, including such officers who signed
the Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages, liabilities or expenses
to
which the Company, each of its directors, each of its officers who signed
the
Registration Statement or controlling person may become subject, under the
Securities Act, the Exchange Act, or any other federal or state statutory
law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Purchaser) insofar as such losses, claims, damages, liabilities or expenses
(or
actions in respect thereof as contemplated below) arise out of or are based
upon
(i) any failure to comply with the covenants and agreements contained in
Sections 5 or 7.2 hereof, or (ii) the inaccuracy of any representation or
warranty made by such Purchaser herein, or (iii) any untrue or alleged untrue
statement of any material fact contained in the Registration Statement, the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in the
Registration Statement, the Prospectus, or any amendment or supplement thereto,
in reliance upon and in conformity with written information furnished to
the
Company by or on behalf of any Purchaser expressly for use therein, and will
reimburse the Company, each of its directors, each of its officers who signed
the Registration Statement or controlling person for any legal and other
expense
reasonably incurred by the Company, each of its directors, each of its officers
who signed the Registration Statement or controlling person in connection
with
investigating, defending, settling, compromising or paying any such loss,
claim,
damage, liability, expense or action.
(c)
Promptly
after receipt by an indemnified party under this Section 7.3 of notice of
the
threat or commencement of any action, such indemnified party will, if a claim
in
respect thereof is to be made against an indemnifying party under this Section
7.3, promptly notify the indemnifying party in writing thereof; but the omission
so to notify the indemnifying party will not relieve it from any liability
which
it may have to any indemnified party for contribution or otherwise under
the
indemnity agreement contained in this Section 7.3 to the extent it is not
prejudiced as a result of such failure. In case any such action is brought
against any indemnified party and such indemnified party seeks or intends
to
seek indemnity from an indemnifying party, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly
with
all other indemnifying parties similarly notified, to assume the defense
thereof
with counsel reasonably satisfactory to such indemnified party; provided,
however,
if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded,
based on an opinion of counsel reasonably satisfactory to the indemnifying
party, that there may be a conflict of interest between the positions of
the
indemnifying party and the indemnified party in conducting the defense of
any
such action or that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available
to
the indemnifying party, the indemnified party or parties shall have the right
to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party
or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election to assume the defense of such action and approval by
the
indemnified party of counsel, the indemnifying party will not be liable to
such
indemnified party under this Section 7.3 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel
in
connection with the assumption of legal defenses in accordance with the proviso
to the preceding sentence (it being understood, however, that the indemnifying
party shall not be liable for the expenses of more than one separate counsel,
reasonably satisfactory to such indemnifying party, representing all of the
indemnified parties who are parties to such action) or (ii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after notice
of commencement of action, in each of which cases the reasonable fees and
expenses of counsel shall be at the expense of the indemnifying party. In
no
event shall any indemnifying party be liable in respect of any amounts paid
in
settlement of any action unless the indemnifying party shall have approved
in
writing the terms of such settlement; provided
that
such consent shall not be unreasonably withheld. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnification could
have
been sought hereunder by such indemnified party from all liability on claims
that are the subject matter of such proceeding.
20
(d)
If
the
indemnification provided for in this Section 7.3 is required by its terms
but is
for any reason held to be unavailable to or otherwise insufficient to hold
harmless an indemnified party under paragraphs (a), (b) or (c) of this Section
7.3 in respect to any losses, claims, damages, liabilities or expenses referred
to herein, then each applicable indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of any losses,
claims, damages, liabilities or expenses referred to herein (i) in such
proportion as is appropriate to reflect the relative benefits received by
the
Company and the Purchaser from the private placement of the Preferred Stock
hereunder or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not
only the relative benefits referred to in clause (i) above but the relative
fault of the Company and the Purchaser in connection with the statements
or
omissions or inaccuracies in the representations and warranties in this
Agreement and/or the Registration Statement which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The respective relative benefits received by the
Company on the one hand and each Purchaser on the other shall be deemed to
be in
the same proportion as the amount paid by such Purchaser to the Company pursuant
to this Agreement for the Shares purchased by such Purchaser that were sold
pursuant to the Registration Statement bears to the difference (the
“Difference”) between the amount such Purchaser paid for the Shares and the
Conversion Shares that were sold pursuant to the Registration Statement and
the
amount received by such Purchaser from such sale. The relative fault of the
Company, on the one hand, and each Purchaser on the other shall be determined
by
reference to, among other things, whether the untrue or alleged statement
of a
material fact or the omission or alleged omission to state a material fact
or
the inaccurate or the alleged inaccurate representation and/or warranty relates
to information supplied by the Company or by such Purchaser and the parties’
relative intent, knowledge, access to information and opportunity to correct
or
prevent such statement or omission. The amount paid or payable by a party
as a
result of the losses, claims, damages, liabilities and expenses referred
to
above shall be deemed to include, subject to the limitations set forth in
paragraph (c) of this Section 7.3, any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim. The provisions set forth in paragraph (c) of this Section
7.3 with respect to the notice of the threat or commencement of any threat
or
action shall apply if a claim for contribution is to be made under this
paragraph (d); provided,
however,
that no
additional notice shall be required with respect to any threat or action
for
which notice has been given under paragraph (c) for purposes of indemnification.
The Company and each Purchaser agree that it would not be just and equitable
if
contribution pursuant to this Section 7.3 were determined solely by pro rata
allocation (even if the Purchaser were treated as one entity for such purpose)
or by any other method of allocation which does not take account of the
equitable considerations referred to in this paragraph. Notwithstanding the
provisions of this Section 7.3, no Purchaser shall be required to contribute
any
amount in excess of the amount by which the Difference exceeds the amount
of any
damages that such Purchaser has otherwise been required to pay by reason
of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of
the Securities Act) shall be entitled to contribution from any person who
was
not guilty of such fraudulent misrepresentation. The Purchasers’ obligations to
contribute pursuant to this Section 7.3 are several and not joint.
21
7.4
Termination
of Conditions and Obligations.
The
restrictions imposed by Section 5 or this Section 7 upon the transferability
of
the Shares and the Conversion Shares shall cease and terminate as to any
particular number of the Shares and the Conversion Shares upon the passage
of
two years from the effective date of the Registration Statement covering
such
Conversion Shares or at such time as an opinion of counsel satisfactory in
form
and substance to the Company shall have been rendered to the effect that
such
conditions are not necessary in order to comply with the Securities Act.
7.5
Information
Available.
So long
as the Registration Statement is effective covering the resale of the Conversion
Shares owned by the Purchaser, the Company will furnish to the Purchaser:
(a)
as
soon
as practicable after available (but in the case of the Annual Report to the
Stockholders, within 150 days after the end of each fiscal year of the Company),
one copy of (i) its Annual Report to Stockholders (which Annual Report shall
contain financial statements audited in accordance with generally accepted
accounting principles by a national firm of certified public accountants),
(ii)
if not included in substance in the Annual Report to Stockholders, upon the
request of Purchaser, its Annual Report on Form 10-K, (iii) upon request
of
Purchaser, its quarterly reports on Form 10-Q, and (iv) a full copy of the
particular Registration Statement covering the Conversion Shares (the foregoing,
in each case, excluding exhibits);
22
(b)
upon
the
reasonable request of the Purchaser, a reasonable number of copies of the
Prospectuses, and any supplements thereto, to supply to any other party
requiring such Prospectuses; and
(c)
the
Company, upon the reasonable request of the Purchaser and with prior notice,
will be available to the Purchaser or a representative thereof at the Company’s
headquarters to discuss information relevant for disclosure in the Registration
Statement covering the Conversion Shares and will otherwise cooperate with
any
Purchaser conducting an investigation for the purpose of reducing or eliminating
such Purchaser’s exposure to liability under the Securities Act, including the
reasonable production of information at the Company’s headquarters, subject to
appropriate confidentiality limitations.
7.6
Delay
in Filing or Effectiveness of Registration Statement.
If the
Registration Statement is not filed by the Company with the Commission on
or
prior to the Filing Date, then for each day following the Filing Date, until
but
excluding the date the Registration Statement is filed, or if the Registration
Statement is not declared effective by the Commission by the Required Effective
Date, then for each day following the Required Effective Date, until but
excluding the date the Commission declares the Registration Statement effective,
the Company shall pay the Purchaser with respect to any such failure, as
liquidated damages and not as a penalty, an amount per 30-day period equal
to
0.5% of the purchase price paid by such Purchaser for its Shares pursuant
to
this Agreement (pro rata on a 30 day basis); and for any such 30-day period,
such payment shall be made no later than three business days following such
30-day period. If the Purchaser shall be prohibited from selling Conversion
Shares under the Registration Statement as a result of a Suspension of more
than
60 consecutive days or Suspensions of more than 90 days in the aggregate
in any
12-month period, then for each day on which a Suspension is in effect that
exceeds the maximum allowed period for a Suspension or Suspensions, but not
including any day on which a Suspension is lifted, the Company shall pay
the
Purchaser, as liquidated damages and not as a penalty, an amount per 30-day
period equal to 0.5% of the purchase price paid by such Purchaser for its
Shares
pursuant to this Agreement (pro rata on a 30 day basis); and for any such
30-day
period, such payment shall be made no later than three business days following
such 30-day period. For purposes of this Section 7.6, a Suspension shall
be
deemed lifted on the date that notice that the Suspension has been lifted
is
delivered to the Purchaser pursuant to Section 11 of this Agreement. Any
payments made pursuant to this Section 7.6 shall constitute the Purchaser’s
exclusive remedy for such events. Notwithstanding the foregoing provisions,
in
no event shall the Company be obligated to pay such liquidated damages (a)
to
more than one Purchaser in respect of the same Shares or Conversion Shares
for
the same period of time or (b) in an aggregate amount that exceeds 10% of
the
purchase price paid by such Purchase for its Shares and Conversion Shares
pursuant to this Agreement. Such payments shall be made to the Purchaser
in
cash.
SECTION
8. Register.
The
Company shall keep at its principal executive office a register for the
registration and registration of transfers of the Preferred Stock. The name
and
address of each holder of the Preferred Stock, each transfer thereof and
the
name and address of each transferee of the Preferred Stock shall be registered
in such register. Prior to due presentment for registration of transfer,
the
person in whose name any Preferred Stock shall be registered shall be deemed
and
treated as the owner and holder thereof for all purposes hereof, and the
Company
shall not be affected by any notice or knowledge to the contrary.
23
SECTION
9. Covenants
With Respect to the Preferred Stock.
Unless
the holders of a majority of the aggregate outstanding shares of Preferred
Stock
shall otherwise agree, the Company shall not:
9.1
take
any
action that may adversely alter or change the designated powers, rights,
preferences or privileges, or impair the conversion rights, of the shares
of
Preferred Stock;
|
9.2
|
increase
the authorized number of shares of Preferred Stock;
or
|
9.3
authorize
or create (by reclassification or otherwise) any class or series of preferred
stock of the Company with powers, rights, preferences and privileges senior
to
the Preferred Stock.
SECTION
10. Broker’s
Fee.
The
Purchaser acknowledges that the Company intends to pay to the Placement Agent
a
fee in respect of the sale of the Shares to the Purchaser. The Purchaser
and the
Company hereby agree that the Purchaser shall not be responsible for such
fee
and that the Company will indemnify and hold harmless the Purchaser and each
Purchaser/Affiliate against any losses, claims, damages, liabilities or
expenses, joint or several, to which such Purchaser or Purchaser/Affiliate
may
become subject with respect to such fee. Each of the parties hereto hereby
represents that, on the basis of any actions and agreements by it, there
are no
other brokers or finders entitled to compensation in connection with the
sale of
the Shares to the Purchaser.
SECTION
11. Notices.
All
notices required or permitted hereunder shall be in writing and shall be
deemed
effectively given: (i) upon delivery to the party to be notified; (ii) when
received by confirmed facsimile or (iii) one (1) business day after deposit
with
a nationally recognized overnight carrier, specifying next business day
delivery, with written verification of receipt. All communications shall
be sent
to the Company and the Purchaser as follows or at such other addresses as
the
Company or the Purchaser may designate upon ten (10) days’ advance written
notice to the other party:
24
|
(a)
|
if
to the Company, to:
|
Aces
Wired, Inc.
00000
Xxxx Xx.,
Xxxxxx,
Xxxxx 00000
Attention:
President
Facsimile:
000-000-0000
with
a
copy to:
Xxxxxxxx
& Knight LLP
000
Xxxx
Xxxxxx
Xxxxx
0000
Xxxxxxx,
Xxxxx 00000
Attention:
Xxxxxxx X. Xxxxxx XX
Facsimile:
000-000-0000
(b)
if
to the
Purchaser, at its address as set forth at the end of this
Agreement.
SECTION
12. Changes.
This
Agreement may not be modified or amended except pursuant to an instrument
in
writing signed by the Company and the Purchaser. No provision hereunder may
be
waived other than in a written instrument executed by the waiving
party.
SECTION
13. Headings.
The
headings of the various sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed to be part of this
Agreement.
SECTION
14. Severability.
In case
any provision contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
14.1
Governing
Law.
This
Agreement is to be construed in accordance with and governed by the federal
law
of the United States of America and the internal laws of the State of New
York
without giving effect to any choice of law rule that would cause the application
of the laws of any jurisdiction other than the internal laws of the State
of New
York to the rights and duties of the parties. Each of the Company and the
Purchaser submits to the nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of any New York State court
sitting in New York County for purposes of all legal proceedings arising
out of
or relating to this Agreement and the transactions contemplated hereby. Each
of
the Company and the Purchaser irrevocably waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have to the
laying
of the venue of any such proceeding brought in such a court and any claim
that
any such proceeding brought in such a court has been brought in an inconvenient
forum.
SECTION
15. Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
constitute an original, but all of which, when taken together, shall constitute
but one instrument, and shall become effective when one or more counterparts
have been signed by each party hereto and delivered (including by facsimile)
to
the other parties.
25
SECTION
16. Entire
Agreement.
This
Agreement and the instruments referenced herein contain the entire understanding
of the parties with respect to the matters covered herein and therein and,
except as specifically set forth herein or therein, neither the Company nor
the
Purchaser makes any representation, warranty, covenant or undertaking with
respect to such matters.
SECTION
17. Assignment.
Except
as otherwise expressly provided herein, the provisions hereof shall inure
to the
benefit of, and be binding upon, the parties hereto and their respective
permitted successors, assigns, heirs, executors and administrators. This
Agreement and the rights of the Purchaser hereunder may be assigned by the
Purchaser with the prior written consent of the Company, except such consent
shall not be required in cases of assignments by an investment adviser to
a fund
for which it is the adviser or by or among funds that are under common control,
provided that such assignee agrees to be bound by the terms of this
Agreement.
SECTION
18. Further
Assurances.
Each
party agrees to cooperate fully with the other parties and to execute such
further instruments, documents and agreements and to give such further written
assurance as may be reasonably requested by any other party to evidence and
reflect the transactions described herein and contemplated hereby and to
carry
into effect the intents and purposes of this Agreement.
SECTION
19. Independent
Nature of Purchasers’ Obligations and Rights.
The
obligations of the Purchaser under this Agreement are several and not joint
with
the obligations of any Other Purchaser, and no Purchaser shall be responsible
in
any way for the performance of the obligations of any Other Purchaser under
the
Agreements. The decision of each Purchaser to purchase the Shares pursuant
to
the Agreements has been made by such Purchaser independently of any other
Purchaser. Nothing contained in the Agreements, and no action taken by any
Purchaser pursuant thereto, shall be deemed to constitute the Purchasers
as a
partnership, an association, a joint venture or any other kind of entity,
or
create a presumption that the Purchasers are in any way acting in concert
or as
a group with respect to such obligations or the transactions contemplated
by the
Agreements. Each Purchaser acknowledges that no other Purchaser has acted
as
agent for such Purchaser in connection with making its investment hereunder
and
that no Purchaser will be acting as agent of such Purchaser in connection
with
monitoring its investment in the Shares or enforcing its rights under this
Agreement. Each Purchaser shall be entitled to independently protect and
enforce
its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Purchaser to be joined
as
an additional party in any proceeding for such purpose.
[Remainder
of Page Left Intentionally Blank]
26
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by
their duly authorized representatives as of the day and year first above
written.
|
ACES
WIRED, INC.
|
|||
|
By:
|
|||
|
Name:
|
|||
|
Title:
|
|||
|
Print
or Type:
|
||
|
Name
of Purchaser
|
||
|
(Individual
or Institution):
|
||
|
Name
of Individual representing
|
||
|
Purchaser
(if an Institution):
|
||
|
Title
of Individual representing
|
||
|
Purchaser
(if an Institution):
|
||
|
Signature
by:
|
||
|
Individual
Purchaser or Individual
|
||
| representing Purchaser: | ||
|
Address:
|
||
|
Telephone:
|
||
|
Telecopier:
|
27
SUMMARY
INSTRUCTION SHEET FOR PURCHASER
(to
be
read in conjunction with the entire
Purchase
Agreement which this follows)
A. Complete
the following items on BOTH
Purchase
Agreements (Please sign two
originals):
|
1.
|
Signature
Page:
|
|
(i)
|
Name
of Purchaser (Individual or
Institution)
|
|
(ii)
|
Name
of Individual representing Purchaser (if an
Institution)
|
|
(iii)
|
Title
of Individual representing Purchaser (if an
Institution)
|
|
(iv)
|
Signature
of Individual Purchaser or Individual representing
Purchaser
|
|
2.
|
Appendix
I - Stock Certificate Questionnaire/Registration Statement
Questionnaire:
|
Provide
the information requested by the Stock Certificate Questionnaire and the
Registration Statement Questionnaire.
|
3.
|
Return
BOTH
properly completed and signed Purchase Agreements including the
properly
completed Appendix I to (initially by facsimile with hand copy
by
overnight delivery):
|
Xxxxxxxx
Curhan Ford & Co.
000
Xxxxxxxxxx Xx, 0xx xxxxx
Xxx
Xxxxxxxxx, XX 00000
Facsimile:
Attn:
_______________________
B. Instructions
regarding the transfer of funds for the purchase of Shares will be sent by
facsimile to the Purchaser by the Placement Agent at a later date.
C. Upon
the
resale of the Conversion Shares by the Purchasers after the Registration
Statement covering the Conversion Shares is effective, as described in the
Purchase Agreement, the Purchaser:
|
(i)
|
must
effectively cause the prospectus delivery requirement under the
Securities
Act to be satisfied (whether physically or through compliance with
Rule
172 under the Securities Act or any similar rule);
AND
|
|
(ii)
|
must
send a letter in the form of Appendix II to the Company so that
the
Conversion Shares may be properly
transferred.
|
Appendix
I
(Page
1
of 3)
STOCK
CERTIFICATE QUESTIONNAIRE
Pursuant
to Section 3 of the Agreement, please provide us with the following information:
|
1.
|
The
exact name that your Shares are to be registered in (this is the
name that
will appear on your stock certificate(s)). You may use a nominee
name if
appropriate:
|
||
|
2.
|
The
relationship between the Purchaser of the Shares and the Registered
Holder
listed in response to item 1 above:
|
||
|
3.
|
The
mailing address of the Registered Holder listed in response to
item 1
above:
|
||
|
4.
|
The
Social Security Number or Tax Identification Number of the Registered
Holder listed in response to item 1 above:
|
Appendix
I
(Page
2
of 3)
REGISTRATION
STATEMENT QUESTIONNAIRE
In
connection with the preparation of the Registration Statement, please provide
us
with the following information:
SECTION
1. Pursuant
to the “Selling Stockholder” section of the Registration Statement, please state
your or your organization’s name exactly as it should appear in the Registration
Statement:
SECTION
2. Please
provide the number of securities that you or your organization will own
immediately after Closing, including those Shares purchased by you or your
organization pursuant to this Purchase Agreement and those shares purchased
by
you or your organization through other transactions and provide the number
of
securities that you have or your organization has the right to acquire within
60
days of Closing:
SECTION
3. Have
you
or your organization had any position, office or other material relationship
within the past three years with the Company or its affiliates?
|
Yes
|
No
|
If
yes,
please indicate the nature of any such relationships below:
SECTION
4. Are
you
(i) an NASD Member (see definition), (ii) a Controlling (see definition)
shareholder of an NASD Member, (iii) a Person Associated with a Member of the
NASD (see definition), or (iv) an Underwriter or a Related Person (see
definition) with respect to the proposed offering; or (b) do you own any shares
or other securities of any NASD Member not purchased in the open market; or
(c)
have you made any outstanding subordinated loans to any NASD
Member?
Answer:
o Yes
o
No If
“yes,”
please describe below
Appendix
I
(Page
3
of 3)
NASD
Member.
The
term “NASD member” means either any broker or dealer admitted to membership in
the National Association of Securities Dealers, Inc. (“NASD”). (NASD Manual,
By-laws Article I, Definitions)
Control.
The
term “control” (including the terms “controlling,” “controlled by” and “under
common control with”) means the possession, direct or indirect, of the power,
either individually or with others, to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise. (Rule 405 under the Securities Act of
1933, as amended)
Person
Associated with a member of the NASD.
The
term “person associated with a member of the NASD” means every sole proprietor,
partner, officer, director, branch manager or executive representative of any
NASD Member, or any natural person occupying a similar status or performing
similar functions, or any natural person engaged in the investment banking
or
securities business who is directly or indirectly controlling or controlled
by a
NASD Member, whether or not such person is registered or exempt from
registration with the NASD pursuant to its bylaws. (NASD Manual, By-laws Article
I, Definitions)
Underwriter
or a Related Person.
The
term “underwriter or a related person” means, with respect to a proposed
offering, underwriters, underwriters’ counsel, financial consultants and
advisors, finders, members of the selling or distribution group, and any and
all
other persons associated with or related to any of such persons. (NASD
Interpretation)
APPENDIX
II
[Transfer
Agent]
[____________]
[____________]
Attention:
PURCHASER’S
CERTIFICATE OF SUBSEQUENT SALE
The
undersigned, [an officer of, or other person duly authorized by]
|
[fill
in official name of individual or
institution]
|
hereby
certifies that
he/she [said institution] is the Purchaser of the shares evidenced by the
attached certificate, and
as
such, sold such shares on
|
[date]
|
in
accordance with the terms of the Purchase
Agreement and in accordance with Registration Statement number
|
[fill
in the number of or otherwise identify
Registration Statement]
|
or
otherwise in accordance with the Securities Act of 1933, as amended, and,
in the
case of a transfer pursuant to the Registration Statement, the requirement
of
delivering a current prospectus by the Company has been complied with in
connection with such sale.
Print
or
Type:
|
Name
of Purchaser
|
|
||
|
(Individual
or
|
|||
|
Institution):
|
|
||
|
Name
of Individual
|
|||
|
representing
|
|||
|
Purchaser
(if an
|
|||
|
Institution)
|
|
||
|
Title
of Individual
|
|||
|
representing
|
|||
|
Purchaser
(if an
|
|||
|
Institution):
|
|
||
|
Signature
by:
|
|||
|
Individual
Purchaser
|
|||
|
or
Individual repre-
|
|||
|
senting
Purchaser:
|
|
EXHIBIT
A
DESIGNATION
OF RIGHTS AND PREFERENCES OF
SERIES
A
CONVERTIBLE PREFERRED STOCK
EXHIBIT B
|
Name
of Subsidiary
|
State
or Other Jurisdiction of
Incorporation/Organization
|
||
|
K&B
Sales, Inc.
|
Oklahoma
|
||
|
Aces
Wired, LLC
|
Texas
|
||
|
Assured
Stored Value, LP
|
Texas
|
||
|
Aces
Wired Amusement Centers No 1, LP
|
Texas
|
||
|
Aces
Wired Amusement Centers No 2, LP
|
Texas
|
||
|
Aces
Wired Amusement Centers No 3, LP
|
Texas
|
||
|
Aces
Wired Amusement Centers No 4, LP
|
Texas
|
||
|
Aces
Wired Amusement Centers No 5, LP
|
Texas
|
||
|
Aces
Wired Amusement Centers No 6, LP
|
Texas
|
||
|
Aces
Wired Amusement Centers No 7, LP
|
Texas
|
EXHIBIT C
ESCROW
AGREEMENT
35
EXHIBIT
D
Form
of
LOCK UP Letter
September
___, 2006
Xxxxxxxx
Curhan Ford & Co.
As
Placement Agent
000
Xxxxxxxxxx Xxxxxx, 0xx xxxxx
Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Dear
Ladies and Gentlemen:
1.
The
undersigned is an owner of record or beneficially of certain shares of Common
Stock (“Common
Stock”)
of
Aces Wired, Inc., a Nevada corporation (the “Company”),
or
securities convertible into, exchangeable, or exercisable for Common Stock
(“Securities”),
[or
[an officer][a director] of the Company]. For clarification purposes, the
“Company” shall mean the Company after giving effect to the reverse stock split
and stock exchange with Goodtime Action Amusement Partners, L.P. The undersigned
understands that the Company proposes to enter into a purchase agreement (the
“Purchase
Agreement”)
with
certain accredited investors providing for the purchase (the “Offering”),
in
transactions exempt from the registration requirements of the Securities Act
of
1933, as amended (the “Securities
Act”),
of
shares of the Company’s Series A Convertible Preferred Stock, $0.001
par
value
per share (the “Shares”).
Unless otherwise stated or defined in this letter agreement, capitalized terms
will have the meanings given to them in the Purchase Agreement.
2. In
connection with the Offering and pursuant to the terms of the Purchase
Agreement, the Company has agreed to file with the Securities and Exchange
Commission a registration statement providing for the resale under the
Securities Act of the shares of Common Stock into which the Shares are
convertible.
3. In
recognition of the benefit that the Offering will confer upon the undersigned
and for other good and valuable consideration, the receipt and sufficiency
of
which is hereby acknowledged by the undersigned, the undersigned hereby agrees
that, without the prior written consent of Xxxxxxxx Curhan Ford & Co. (which
consent may be withheld in its sole discretion), he, she or it will not, during
the period commencing on the date hereof and ending on the earlier of (a)
180 days
after the date the Registration Statement (as defined in the Purchase Agreement)
is declared effective, or (b) two years from the date hereof ((a) and (b),
each
a “Lock-Up
Period”),
(i)
directly or indirectly offer, pledge, sell, contract to sell, sell any option
or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of (including, without limitation, any short
sale), establish an open “put equivalent position” within the meaning of Rule
16a-1(h) under the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (collectively, the “Exchange
Act”),
lend
or otherwise dispose of or transfer any Securities currently or hereafter owned
either of record or beneficially (as defined in Rule 13d-3 under the Exchange
Act) by the undersigned, or publicly announce the undersigned’s intention to do
any of the foregoing, or (ii) enter into any swap or other arrangement that
transfers, in whole or in part, directly or indirectly, any of the economic
consequences of ownership of any Securities currently or hereafter owned either
of record or beneficially (as defined in Rule 13d-3 under the Exchange Act)
by
the undersigned, or publicly announce the undersigned’s intention to do any of
the foregoing, whether any such transaction described in clause (i)
or (ii) above is to be settled by delivery of common stock of the
Company or such other securities, in cash or otherwise ((i) or (ii), each a
“Disposition”).
36
September
, 2006
Page
37
The
foregoing restriction has been expressly agreed to preclude the holder of the
Securities from engaging in any hedging or other transaction which is designed
to or reasonably expected to lead to or result in a Disposition of Securities
during the Lock-up Period, even if such Securities would be disposed of by
someone other than such holder. Such prohibited hedging or other transactions
would include, without limitation, any short sale (whether or not against the
box) or any purchase, sale, or grant of any right (including, without
limitation, any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index) that
included, relates to, or derives any significant part of its value from
Securities. The undersigned also agrees and consents to the entry of stop
transfer instructions with the Company’s transfer agent and registrar against
the transfer of shares of Common Stock or Securities held by the undersigned
except in compliance with the foregoing restrictions.
4. Notwithstanding
the foregoing, subject to applicable securities laws, the undersigned may
transfer securities of the Company as follows: (i) as a bona fide gift or
gifts, provided that the donees thereof agree in writing to be bound by the
restrictions set forth herein; (ii) to any trust for the direct or indirect
benefit of the undersigned or the immediate family of the undersigned, provided
that the trustee of the trust agrees in writing to be bound by the restrictions
set forth herein; (iii) as a distribution to stockholders, partners or
members of the undersigned, provided that such stockholders, partners or members
agree in writing to be bound by the restrictions set forth herein; (iv) as
required under any of the Company’s benefit plans or bylaws; (v) as collateral
for any bona fide loan, provided that the lender agrees in writing to be bound
by the restrictions set forth herein; and (vi) with respect to sales of
securities acquired in the open market after the effective date of the
Registration Statement (so long as no public filing pursuant to the Securities
Exchange Act of 1934, as amended, or otherwise, or any public announcement,
is
required in connection with such sale). For purposes of this letter agreement,
“immediate family” shall mean any relationship by blood, marriage or adoption,
not more remote than first cousin.
5. With
respect to the Offering only, the undersigned waives any registration rights
relating to registration under the Securities Act, and the rules and regulations
promulgated thereunder, of any Common Stock or Securities owned either of record
or beneficially by the undersigned.
6. The
undersigned acknowledges that Investor is relying on the agreements of the
undersigned set forth herein in making its decision to consummate the
transactions contemplated by the Purchase Agreement.
7. This
Lock-Up Agreement shall be governed by and construed in accordance with the
laws
of the State of New York without regard to principles of conflict of
laws.
37
September
, 2006
Page
38
8. This
Lock-Up Agreement may be executed in one or more counterparts and delivered
by
facsimile, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
[SIGNATURE
PAGE FOLLOWS]
38
|
Very
truly yours,
|
[Name
of Stockholder or Director or Officer]
EXHIBIT
E
Form
of
Confidentiality and Non-Competition Agreement of Xxxxxx Xxxxxx
